The IRS recently issued the 2017 version of the Form 8941, Credit for Small Employer Health Insurance Premiums, and the related Instructions. Form 8941 is used by small employers to calculate and claim the small business health care tax credit. As background, this tax credit benefits employers that do all of the following:
- Offer coverage through the small business health options program, also known as the SHOP Marketplace
- Have fewer than 25 full-time equivalent employees
- Pay an average wage of less than $50,000 a year (indexed annually)
- Pay at least half of employee health insurance premiums
An employer may only claim the credit for a two-consecutive-year period.
The 2017 instructions include three important changes. First, the average annual wage for 2017 is increased from $52,000 (in 2016) to $53,000. Second, the IRS states that employers located in Hawaii cannot claim this credit for insurance premiums paid for health plans beginning after 2016. This is because Hawaii’s Section 1332 Innovation Waiver related to the SHOP was approved by HHS. Thus, effective 2017, the state of Hawaii is no longer required to maintain a SHOP because of the state’s Prepaid Health Care Act, which requires employers of all sizes to offer affordable coverage to employees. The state also provides premium assistance to small employers. There is transition relief for Hawaii employers that claim the credit for plan years beginning in 2016 and continuing into 2017. The credit will continue to be available for those months falling in 2017.
Lastly, small employers located in Pierce, Polk and St. Croix counties in Wisconsin are eligible to claim the credit if they offered health insurance coverage outside of the exchange to employees and otherwise qualify for the credit. The credit is available to employers who did not offer coverage through the SHOP because in 2016, the SHOP in these counties failed to offer qualified health plans to small employers. The employer must have a principal business address in one of the identified counties.
If a small employer qualifies for the health care tax credit, they should work with their accountant to properly claim the credit with the IRS.
Form 8941 »
Form 8941 Instructions »